Articles

D.C. Case Law Update

Date: January 28, 2019
Condominium foreclosures in the District of Columbia have recently been the subject of several appeals cases that have clarified how the court interprets the foreclosure provisions of the D.C. Condominium Act.  On December 17, 2018, the District of Columbia Court of Appeals issued a Memorandum of Opinion in the case of Green Parks, LLC v. PMT NPL Financing, docketed as CA-9733-15. 

In that case, Green Parks, LLC (“Green Parks”) appealed an order from the Superior Court granting summary judgment in favor of PMT NPL Financing (“PMT”) from a judicial foreclosure action.  This case is consistent with the recent string of cases in the District of Columbia dealing with D.C. condominiums and super-priority foreclosures.  The recent string of cases focuses on determining whether foreclosures held pursuant to the D.C. Condominium Act are considered “super-priority” foreclosures or foreclosures subject to the first deed of trust, regardless of how the foreclosures were advertised.  The Court has taken a “looks like a duck, swims like a duck, quacks like a duck” approach to these cases.  In essence, a foreclosure noticed by a D.C. condominium with “subject to” language (implying that the foreclosure is not a “super-priority” foreclosure) is considered a “super-priority” foreclosure if the funds recovered from the foreclosure sale satisfy the latest six months of unpaid assessments.  In Green Parks, the record did not contain an “Accounting of Foreclosure Sale,” which the Court of Appeals believed would help determine whether the condominium foreclosed on its super-priority lien or not. 

Green Parks argued that there was no evidentiary support for the Association’s legal conclusion that it conducted a non-priority lien foreclosure that left the PMT’s lien intact.  PMT’s position was that the Association chose to conduct a non-priority lien foreclosure and sold the property subject to the first deed of trust.

On appeal, the Court of Appeals vacated the Superior Court’s summary judgment order and remanded the case to Superior Court for further proceedings.  In doing so, the Court of Appeals noted Green Park’s contention that the Association foreclosed to recover the latest six months of assessments, thus exercising its super-priority lien, which in turn would extinguish PMT’s interest in the Property.  However, the Court of Appeals highlighted the fact that the summary judgment record did not contain an Accounting of Foreclosure Sale that would help the Court determine whether the Association actually foreclosed on any portion of its super-priority lien.  While noting the “maximum flexibility” afforded to D.C. Condominium’s to choose which portion of their lien to foreclose upon, the Court of Appeals was not “comfortable” with the Superior Court’s conclusion that no reasonable trier of fact could conclude that the foreclosure sale conducted by the Association was a super-priority lien.   

Impact for Associations
The law in this area is still being shaped because the Court of Appeals is only addressing the issues brought before it on a case by case basis.  Based on this decision, an Association that wishes to foreclose on the non-priority portion of its lien must make sure that none of the proceeds are applied to any of the most recent six months of delinquent assessments owed to the Association.  It is important to note that the Complaint in Green Parks was originally filed on December 16, 2015, over three (3) years ago.  There are likely more cases before the Court of Appeals that were filed within the last three (3) that have not yet been decided and could possibly further shape this area of the law. 

Recommendation
This area of the law is currently in flux, with several recent decisions issued such as Liu v. U.S. Banks Nat’l Ass’n, 179 A.3d 871 (D.C. 2018) and 4700 Conn 305 Trust v. Capital One, N.A., 193 A.3d 762 (D.C. 2018).  In order to avoid any and all unforeseen/unwanted consequences, we recommend that Association’s contact any of our D.C. community association attorneys.